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Peeking inside DoD's next version of Better Buying Power

Frank Kendall, undersecretary of Defense for acquisition, technology and logistics

Two years after the Pentagon introduced a package of acquisition improvement directives to the vast community of professionals who buy products and services for the Defense Department, some of the key tenets have taken hold and produced real results. Others have proved unproductive, according to the Pentagon's top acquisition official.

Frank Kendall, the undersecretary of Defense for acquisition, technology and logistics, in a wide-ranging interview on progress made through the department's Better Buying Power initiative, told Federal News Radio that concepts such as "should cost" management and affordability caps have made a genuine difference in getting more value from the Pentagon's contracting budget.

But among the two dozen areas DoD targeted in its 2010 Better Buying Power guidance, elements exist that haven't worked precisely as planned. Some will be abandoned and others will be revamped in a 2.0 version of the guidance due for release sometime in the next month, Kendall said.

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"The whole idea of Better Buying Power was to implement a philosophy of continuous improvement. We made a number of attempts to get better results out of the acquisition system, and they were policies we thought had a lot of merit. We've had some successes, we've had a few things we didn't get the implementation quite right on, and we've had a few things we probably could drop."

The changes Kendall intends to make will include a more refined view of the department's push toward fixed-price incentive fee contracts, a vehicle the Pentagon thought was underutilized when the 2010 guidance was first drafted.

"We were concerned at the time that there might be an overreaction to that, and it turned out we were right," he said. "A lot of (contracting officers) leapt onto that as the schoolhouse solution because they thought it was the approved type of contract. But we always wanted people to think carefully about the right kind of contract to use in any given situation. We have a range of contract types for a very good reason. We have a lot of different types of situations. So we're going to moderate our guidance a little bit on that."

Additionally, Kendall said, plans to implement a preferred supplier program across the Defense Department have gone back to the drawing board.

Under a pilot program the Navy was testing at the time, after firms had won a contract, they could get favorable treatment with regard to special award fees and other considerations if they had shown a consistent record of "delivering quality products and services, robust subcontracting management, cost containment, and on-time delivery."

Frank Kendall, undersecretary of Defense for acquisition, technology and logistics

Applying the original Navy concept to the rest of the Defense Department proved unworkable, Kendall said.

"We could never agree on how to do it and how to measure and reward better performance," he said. "I think it's still an important thing to do, but we've had to retrench a little bit. We've handed it back to the Navy to take a leadership role on that one. We're further along than when we started, but we still have a ways to go."

But Kendall said other aspects of Better Buying Power have clearly paid off.

One central theme of the initiative was "should cost" management, the idea that acquisition managers should exploit every opportunity to squeeze unnecessary and unproductive costs out of their programs rather than assuming that the cost and schedule overruns that have plagued defense programs for years are an immutable characteristic of defense acquisition.

"The basic philosophy here was that we should not just accept the independent cost estimates as a self-fulfilling prophesy and assume that we'd spend to those levels," he said. "We should look at opportunities to reduce cost well ahead of time, and I think that idea has gotten across to the workforce now. It took a long time, but I think we've gotten a lot of success with that."

Also, Kendall said, the department has made inroads with the creation of affordability caps. The original idea was to instill the notion that the cost and schedule of an acquisition should be set out at the very beginning of a program and treated as a requirement. Technical wish lists would have to meet those cost and schedule parameters, not the other way around.

"From there, we can force the design to fit into that basket. We have to think not just the cost of the product itself, but the cost of that product across its entire lifecycle," he said. "What we started doing two years ago was to impose cost caps on our products for affordability reasons. We did that not just based on the cost of a product that people wanted to buy, but the amount of money available to buy any product. I think implementing affordability targets, both for production and sustainment is one of the things that's been fairly successful."

Kendall called out several specific programs as evidence that the Pentagon's emphasis on cost control has resulted in savings it wouldn't have otherwise seen, including recent multi-year purchases for MH-60 helicopters and the Navy's ongoing effort to trim its requirements and costs for the submarine that will eventually replace the current Ohio-class.

"But going forward, our task is going to be to actually enforce those caps," he said. "The operational and requirements communities in particular are going to have to accept the fact that they have to trade away some requirements that they'd like to have. That's going to be difficult for them. I think we've made progress there, but the most difficult work remains to be done."

This story is part of Federal News Radio's daily DoD Report. For more defense news, click here.